These are the best predictors for startup success
Welcome back to Meet the Crew, where we highlight Backstage Capital crew members’ journeys into venture capital and shed light on what drives them.
Facebook’s initial public offering served as a wake-up call for Brittany Davis. Davis, now a partner at Backstage Capital, worked on Wall Street at the time and couldn’t help but notice how few Black people were involved in these types of big financial windfalls.
“I just felt like we were all missing out, but I didn’t know how I could be part of the solution,” Davis told Green Room.
That’s what led her to attend Harvard Business School. Davis didn’t know at the time she would later pursue venture capital, but she saw business school as her escape from Wall Street, which felt like too traditional of a path.
While at Harvard, Davis plugged into the entrepreneurial network. She eventually started her own company but hit some roadblocks while trying to raise funding.
Davis was able to get meetings with investors but didn’t have the product market fit necessary to close any deals, she said. What surprised Davis the most, however, was what happened when other Black founders in her network tried to raise funding. Despite having a better product and more traction, Davis said, they couldn’t get any VC to talk to them. The only thing they seemed to lack was an affiliation with Harvard.
That experience opened her eyes to some of the inequities in the venture capital space. But the tipping point for Davis happened when she asked a VC how many Black founders he had met with to potentially invest in their startups. Davis was the first.
That’s when she realized increasing access to capital for Black founders was the problem she wanted to solve. Now, Davis just had to find a way to get her foot in the door.
Davis spent about six months trying to find a job in venture capital. She landed her first gig at Village Capital in May 2016 as a new ventures manager. Davis worked at Village Capital for a little over a year before relocating to the San Francisco Bay Area and working with #ANGELS. But Davis didn’t become a sole decision maker until she joined Backstage Capital.
“That was the start of me having a role where I could finally allocate capital to the people that I wanted,” Davis said.
Below is an edited and condensed transcript of Green Room’s conversation with Davis about what she looks for in startups before she writes a check, indicators of a startup’s potential success, pattern matching, tips for investing and more.
A good startup pitch needs to spark joy
I have been there as a founder. And, more importantly, I know first hand what to avoid and what went wrong with my own startup. I also know how hard it is and how challenging it can really be to communicate your idea.
Before investing in a startup, I really have to understand the founder’s vision and I want to be able to dream with the founder. I’ll ask the founder if they could visualize or explain what their company looks like 10 years out, after they’ve had all the success in the world. If that sparks enough joy on my side, that’s when I know.
I know most founders are trained to think about the next six months or a year and that’s great. I think you have to have that realistic idea of execution in the short term. But it’s also important for them to dream big and for me to really connect to that long-term vision.
Investment tip: “Just get in the game”
I wish I had started sooner. In some ways, I had more money before business school, and I could have been angel investing. But I didn’t know what I didn’t know. Now, I think there are a lot more tools available for people who are interested in investing. And even if you’re not an accredited investor, there are paths to angel investing, like crowdfunding, for example. Really good companies are going through crowdfunding and that wasn’t the case five years ago.
So my advice is to just get in the game. I thought you had to do all of these things and check all these boxes before you could be worthy of investing. I thought I had to have built a successful company, and know everything there was to know about finance in order to invest. I had a lot of imposter syndrome coming in because I failed at my company. But so much of that failure is actually what drives me to make sure that the right people get capital early, and enables me to better help founders how to communicate with investors, because it took me a few iterations to get there.
So, starting sooner and not being hung up on what you think you need to have already done. Anybody can be an investor if you are confident about where you want your money to go. And there are tools to help you think about returns and investment strategies.
On avoiding pattern matching
I remember Arlan talking about pattern matching for grit versus pattern matching for literally any other kind of checked box that the industry has looked for in the past. One of the questions we asked founders for Backstage Accelerator was about what they were most proud of accomplishing in their lives. That opened up a whole new level of explaining life circumstances and the way people overcame things. And those are actually better predictors of resiliency and how a founder will get through those tough times in the startup journey.
It’s less about only noticing their professional or educational backgrounds, but more about picking up on other things that I think a lot of VCs are either not asking or overlooking.
Representation is representation is representation
Being a mom is also part of who I am now. That’s an area that also drives me. I realize I don’t talk about it a lot, unless it comes up. But my daughter, Ella, comes up all the time now because I am without full-time childcare at the moment. So she’s on all my video calls.
One of the Backstage apprentices recently reached out and said it was inspiring to see her. It’s funny because I had been stressed out, trying to keep Ella entertained, and not thinking about how it can help other folks see how to exist in a workspace with kids. I didn’t think about how someone else could get value from seeing that I could get work done and still take care of my baby. So it just made me think about how different types of representation can be so important.
Thanks for tuning in to Meet the Crew. If you missed the first installment about Backstage Principal Chacho Valadez, you can read it here. Also, be sure to subscribe to our Mixtape newsletter to get special Backstage content in your inbox.
